Global Context of the Gig Economy:
Retirement for Non-Traditional Workers
One of the biggest events of the last decade has been the exponential rise of the ‘gig economy’. The term ‘gig’ has been traditionally used to describe a short-term engagement for an artist’s services, such as a musician, writer, or actor. Today, the word has taken on a broader meaning to include knowledge workers who take on short-term contracts to deliver a specific product or service for the hiring business. Gig work has always been there, albeit in small pockets worldwide. However, the rise of gig work has been fuelled by the COVID-19 pandemic, which forced millions to work remotely and gave the practice traction. According to a recent World Bank Report, the gig economy is 12 percent of the global labour market and is expected to increase.
While countries in the Global North have the highest concentration of non-traditional workers, countries in the Global South are quickly catching up. The same World Bank study cites that gig work grew 130 percent in sub-Saharan Africa compared to 14 percent in North America. Furthermore, 60 percent of Global South companies reported increased work outsourcing to non-traditional workers compared to less than half in countries within the Global North. The verdict is clear: the gig economy has fully dawned in Africa and is here to stay.
Spotlight on Zambia
Zambia has also seen a sharp rise in the number of non-traditional workers driven by increased access to reliable internet and technological advancements, including more affordable gadgets. Furthermore, the youth that dominates Zambia’s population opts for gig work in search of freedom, flexibility, and greater autonomy over their time. While legacy industries such as banking, telecoms, and manufacturing still demand that workers report to the office, the rise in tech-enabled businesses will further accelerate the rise of non-traditional workers in Zambia.
However, what non-traditional workers gain in freedom and flexibility, they lose in reliable and consistent benefits (financial and non-financial) in an economy under increasing pressure. Full-time employees enjoy a consistent monthly salary, health insurance, and various pension employer-sponsored benefits.
On the other hand, non-traditional workers are responsible for ensuring that they secure an economic future for themselves today and beyond their highly productive years. According to insights provided by Octagon Africa Financial Services, a leading pensions services company in Zambia, financial institutions in Zambia will soon create products tailored explicitly to non-traditional workers as the country aims to close the financial inclusion gap.
Micro-insurance products have already passed regulation, and micro-pensions are currently in the pipeline. These will cover non-traditional workers’ lower and higher end and aim to put them on equal footing with their employed counterparts.
Unfortunately, current pension schemes have not responded to the rise of the non-traditional economy and remain tightly regulated. This leads to the exclusion of non-traditional workers, requiring them to plan for their retirement without access to specialised financial products designed to meet their unique needs.
The Challenges of Non-traditional Workers
Numerous challenges make planning for retirement particularly difficult for non-traditional workers. Firstly, non-traditional workers have irregular incomes that vary for each period. This proves challenging for non-traditional workers to establish regular saving habits and build financial reserves for retirement. Furthermore, periodic income streams prove taxing on non-traditional workers attempting to scale their businesses as they frequently lag on statutory requirements and often need help to employ additional staff.
Additionally, non-traditional workers need help accessing employer-sponsored benefits such as health insurance, employer-funded pension schemes, paid leave and other allowances. The employer typically bears these benefits, shielding the employee from unforeseen circumstances. On the other hand, non-traditional workers must take extra caution to ensure they provide for their benefits.
Lastly, and perhaps the most overlooked challenge faced by non-traditional workers, is the mental stress associated with the absence of long-term contracts and job security. Most non-traditional workers may experience the unease of running out of money or opportunities; therefore, to ensure their long-term survival, they may need to work long hours to build financial security. This further underscores the need for social safety nets that cater to the non-traditional economy’s unique challenges.
Paving a Successful Path as a Non-traditional Worker
Despite these challenges, the non-traditional economy continues to grow and provide substantial financial benefits for those who have developed the understanding to navigate this new world. According to Octagon Financial Services, there are four essential steps non-traditional workers can take to ensure that they reap the maximum benefits from non-traditional work.
Firstly, non-traditional workers are encouraged to maintain low-cost lifestyles, which may reduce reliance on a regular income. Non-traditional workers with high overheads may find it challenging to meet these responsibilities when income is inconsistent. Octagon Financial Services recommends maintaining a low-cost lifestyle to counter unforeseen circumstances.
Secondly, building a savings fund of 6 to 12 months of monthly expenses and a low-cost lifestyle is imperative. Higher lifestyle costs mean larger stockpiles are needed in case of emergencies. Therefore, non-traditional workers must continuously audit their lifestyles while building significant savings.
Skill development is another area in which non-traditional workers can invest their income. Their full-time counterparts benefit from employer-sponsored personal development programmes unavailable to non-traditional workers. Therefore, the onus to stay on top of emerging trends and personal development remains on non-traditional workers.
Finally, the non-traditional worker must be mindful of their health, as they are essentially a company within themselves. Illness acts as a hamper, and business operations cease, possibly limiting their effectiveness and, by extension, income during that period.
The surge of the gig economy over the past decade, both globally and in Zambia, reflects a significant shift in work dynamics. While providing newfound freedom and flexibility for non-traditional workers, it exposes them to unique financial security and retirement planning challenges. Efforts to introduce micro-insurance and micro-pensions in Zambia are steps in the right direction. Yet, a crucial need remains for more comprehensive solutions presented on a national level that are tailored to the gig economy’s distinctive demands.
